Articles in Category: Ferrous Metals

President Donald J. Trump has completed his first 100 days in office and thus far has signed into law 28 pieces of legislation.

While Trump has made traction in some respects, the fate of the nation’s steel industry was still up in the air — that is, until Trump signed a Presidential Memorandum in late April calling on Department of Commerce Secretary Wilbur Ross to prioritize an investigation into the effects of steel imports on U.S. national security.

Two-Month Trial: Metal Buying Outlook

Here are three things you should know about this directive and what it could mean for the nation’s steel industry.

The Trade Expansion Act of 1962

The investigation is being conducted under Section 232 of the Trade Expansion Act of 1962. According to the Department of Commerce, Ross is tasked with determining the following:

  • “Whether steel imports cause American workers to lose jobs needed to meet security requirements of the domestic steel industry;
  • Any negative effects of steel imports on government revenue; and
  • Any harm steel imports cause to the economic welfare of the U.S.”

The Current Situation

Despite an existing steel industry, steel imports saw a 19.6% year-over-year increase in February, and, currently, imported steel accounts for 26% of the U.S. market share, according to the Department of Commerce.

Further, the U.S. steel industry is only operating at 71% capacity, and jobs in the industry has continued to take a steady hit. Read more

Here’s What Happened

  • The Automotive MMI, our sub-index of industrial metals and materials used by the automotive sector, dropped by one point for a May reading of 8, a 1.1% drop.
  • This is the third straight month of declines for this index. Back in February 2017, the Automotive MMI hit 92 — its highest level since November 2014. But now, flagging HDG steel, copper and shredded scrap prices are dragging on the rest of the index.

What’s Going On in the Background?

  • The U.S. auto market is officially slowing. Car sales dropped 4.7% to 1.43 million units, according to Autodata Corp. That is a bigger drop than forecasted by both Edmunds and Kelly Blue Book, according to several news outlets.
  • Meanwhile in China, the first quarter of 2017 saw a 7% overall increase in car sales. As we reported in our Monthly Metal Buying Outlook (free trial here), that was the strongest showing since 2014. The Chinese government has extended tax cuts for small vehicles, which should keep citizens buying cars through the year.

What Metal Buyers Should Look Out For

  • Many factors coming down the line — including increased construction projects in China — portend longer-term support for key automotive constituent metals such as HDG steel.
  • Even though HDG has slipped a bit this month, prices for that metal form in China could see room for improvement.

Key Price Movers and Shakers

For full access to this MetalMiner membership content:
Log In |

Our Raw Steels MMI fell seven points* due to the slump in China’s steel prices in April.

Raw Steels MMI

(*Note: We changed one of the data elements of our index to map the underlying market more effectively. That change contributed to a lower number this month.)

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

Since their peak in February, China’s steel prices have fallen by more than 20%, while U.S. prices have continued to climb. But guess what, things changed towards the end of April. Prices in China started to recover (see how we predicted that) while U.S. prices fell (yes, we predicted that too). In this post, I’ll analyze what this price divergence means and how you — assuming you buy or invest in steel — can take advantage of it.

China HRC price. Source:MetalMiner IndX

For full access to this MetalMiner membership content:
Log In |

In preparing our new Monthly Metal Buying Outlook for May, we’ve seen that prices in both industrial metal markets and commodity markets have fallen over the past month.

What’s the deal?

Well, a few things are happening that stirred up that pot:

  • The U.S. dollar fell to a five-month low. The dollar’s movement usually has an inverse relationship with that of commodity prices, but not lately. Election season across the pond in France is heating up, and the outcome of the first round of presidential voting had eased concerns about the future of the euro, which rose against the dollar.
  • Interestingly, China’s annual GDP growth increased to 6.9% during Q1 2017, the fastest growth rate since the second half of 2015. Not only that, but the country also announced that it will build a “new megacity” — two things that would usually portend higher industrial metals prices. And yet…here’s what China’s economy has been doing since 2012 (the overall trend is pretty clear):

  • President Trump ordered two investigations, one for steel and one for aluminum, into whether imports of those metals threaten U.S. national security.

Check out how these types of events and trends are affecting six non-ferrous metal markets and four specific forms of steel — HRC, CRC, HDG and plate — in our detailed monthly analysis.

Take the two-month free trial!

India’s steel story continues to shine. The country’s consumption of finished steel goods is expected to grow by 6.1% in 2017 compared with 2016.

According to the World Steel Association (WSA), India’s steel product demand could reach 88.6 million tons in 2017, up from 83.5 million tons in 2016. WSA was also quite positive on India’s steel demand in 2018, projecting a growth of 7.1% to 94.9 million tons.

Two-Month Trial: Metal Buying Outlook

Steel consumption in India’s neighboring country China, however, would remain flat in 2017. The WSA estimated a 2% slump in demand for 2018.

The Indian Steel Association, too, has said publicly that the country was well on its way to becoming the second largest consumer of steel, beating the United States to the second spot.

The WSA said in its report that the U.S. was expected to continue to lead the growth in the developed work in 2017-18, based on strong fundamentals, newly announced measures related to fiscal stimuli, and rising infrastructure spending. It has estimated that steel demand in the U.S. will grow by 3% in 2017 to 94.3 million tons and then by 2.9% in 2018 to 97.1 million tons.

Free Download: The April 2017 MMI Report

In India, in a further fillip to steel production, the government was contemplating making the use of Indian steel compulsory in all government or public sector funded projects. This would raise the per-capita consumption from 61 kilograms (134.5 pounds) to 160 kilograms (353 pounds) and increase production from 120 million ton to 300 million ton by 2030. The indication of this was recently given by Union Minister for Steel Chaudhary Birender Singh.

After reviewing the performance of Rashtriya Ispat Nigam Limited (RINL), the minister told reporters that “stringent measures” like imposing anti-dumping duty and minimum import price (MIP) had led to imports falling by 39% and exports increasing by 57%.

He added that the India’s national policy on steel would be unveiled soon, after receiving approval of the Union Cabinet.

Free Sample Report: Our Annual Metal Buying Outlook

The move to make use of “Make in India” steel mandatory by government bodies comes in the wake of the central government’s commitment to support the domestic steel sector, which has been incurring losses during the last couple of years due to excess production and dumping of steel products from China into India.

Incidentally, India was aiming for a steel production capacity of 300 million tons by 2030, while the current capacity is 120 million tons and production was 90 million tons.

This week, President Donald Trump and the Department of Commerce used executive orders, new anti-dumping investigations, memoranda invoking national security concerns and other executive branch tools to get tough on foreign steel imports.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

Although Trump or Commerce Secretary Wilbur Ross never overtly stated it, the target is clearly China and the global steel overcapacity that it’s the main culprit in creating. China’s steel exports hit a record 112.4 million metric tons in 2015, then dropped slightly to 108.49 mmt last year, as Chinese mills have been chastened by threats of a trade dispute.

Fre trade

The Trump administration is using every tool in the box on steel overcapacity. Source: Adobe Stock/Argus.

To date, the Global Forum on Steel Overcapacity hasn’t caused overcapacity to come down very much. Can a section 232 investigation or other U.S.-only actions change that? The U.S. steel industry certainly seems to think so. Or it’s at least saying, “why not try?”

Steelmaker executives such as U.S. Steel CEO Mario Longhi and SSAB Americas President Chuck Schmitt flanked Trump and Ross at the memorandum-signing ceremony calling for the Section 232 investigation yesterday. The praise was universal from steel producers as one might expect, too. Still, Trump’s latest salvo on trade will renew concerns that China may retaliate.

China’s Foreign Ministry spokesman Lu Kang said today the country needed to ascertain the direction of any U.S. investigation before it could make a judgment. There’s also the fact that Trump now claims that he and Chinese President Xi Jinping are the best of friends.

Chinese steel executives also repeated their mantra that overcapacity is not just China’s problem and it needs global coordination to resolve it, but also said it would be tough to rein in the sector.

“The Chinese government will not set export limits for the steel mills and could not keep track of every mill,” Li Xinchuang, vice chairman of the China Iron and Steel Association, told Reuters.

What may be more effective is rising steel prices in China and what looks more and more like a very real crackdown on pollution and dirty air in China. An early-year surge in Chinese steel prices has lifted the prices of its export products and China has lost its competitiveness with other markets. With coking coal prices increasing, Chinese steel prices could increase even more, which our Lead Forecasting Analyst, Raul de Frutos, pointed out this week.

Two-Month Trial: Metal Buying Outlook

On a personal note, this will be my last MetalMiner week-in-review. I have thoroughly enjoyed informing all of you wonderful readers and site users about the latest developments in metals markets these last three years. Thank you for taking advantage of our services. It has been an honor.

 

UPDATED 11:47 AM with Comments from President Trump, Commerce Secretary Wilbur Ross and the American Iron & Steel Institute.

President Donald Trump will sign a directive asking for a speedy probe into whether imports of foreign-made steel are hurting U.S. national security, two administration officials told Reuters on Wednesday.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

Trump signed the memorandum related to section 232 of the Trade Expansion Act of 1962 at the White House with leaders of some domestic steel companies, such as U.S. Steel‘s CEO Mario Longhi and SSAB Americas President Chuck Schmitt in attendance. The law allows the president to impose restrictions on imports for reasons of national security. The order would only task the Commerce Department with starting a probe into the imports and if they, indeed, harm national security. Reuters reported that Commerce Secretary Wilbur Ross has already tasked Commerce personnel with starting the probe.

Trump said Ross and Commerce would be back “very, very soon” with recommendations about how to protect the American steel industry. He also repeated campaign trail criticism of the North American Free Trade Agreement and said that farmers in Wisconsin are also suffering from cheap imports of dairy products from Canada.

“Times of crisis call for extraordinary measures. Massive global steel overcapacity has resulted in record levels of dumped and subsidized foreign steel coming into the U.S. and the loss of nearly 14,000 steel jobs,” said Thomas J. Gibson, president and CEO of the American Iron & Steel Institute, the largest trade organization of North American steel producers. “The Administration launching this investigation is an impactful way to help address the serious threat posed by these unfair foreign trade practices, and we applaud this bold action.”

According to Ross, the investigation was “self-initiated” by Commerce and will consider “the domestic production (of steel) needed for the projected national defense requirement” and if domestic industries can meet that requirement. It will also look at “the impact of foreign competition on specific domestic industries and the impact of displacement of domestic product because of foreign imports.”

There are national security implications from imports of steel alloys that are used in products such as the armor plating of ships and require a lot of expertise to create and produce.

The Department of Commerce started investigations of imports of carbon and alloy steel wire rod from Belarus, Italy, South Korea, Russia, South Africa, Spain, Turkey, Ukraine, the United Arab Emirates, and the United Kingdom, and companion countervailing duty investigations of imports of carbon and alloy steel wire rod from Italy and Turkey. The investigations cover hot-rolled products of carbon and alloy steel.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

The alleged dumping margins range from 18.89% (Italy) to 756.93% (Russia) and both of the alleged countervailing subsidies are above de minimis (less than 2%). The U.S. International Trade Commission is scheduled to make its preliminary injury determinations on or before May 12, 2017.

The petitioners are Gerdau Ameristeel US Inc. in Florida, Nucor Corporation based in North Carolina, Keystone Consolidated Industries of Texas, and Charter Steel in Wisconsin.

Beijing is caught in something of a quandary.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

On the one hand, an admirable, and increasingly important social imperative, the Chinese government’s focus on air pollution, has resulted in a crackdown on a range of polluting industries. Coal-fired power stations around Beijing and other major cities have been closed. Steel capacity has been targeted for cutbacks, although not universally.

Reports suggest rebar production used in construction has been prioritized over other product areas and that’s just one example of selective enforcement. A recent report by Reuters states new aluminum production capacity has been halted. What China fails to meet capacity cutback targets — an issue one suspects would have been “worked around” a year or two back when environmental considerations where less of an imperative?

This crackdown on output comes at the same time as the economy is performing quite well. Official data released last week showed China’s economy grew by a better-than-expected 6.9% comparing the March quarter to the same period in the previous year, Australian Financial Review reports. That is up from 6.8% in the final quarter of 2016. Industrial production was also far better than forecast, growing at 7.6% in March compared to 6.3% in first two months of the year. Read more

President Donald Trump (R-N.Y.) is set to sign an executive order this afternoon ordering enforcement and review of the H-1B visa program, popular in the technology industry, on a visit to the headquarters of Snap-On Inc., a tool manufacturer in Kenosha, Wis., according to senior administration officials.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

He will also use what the White House called the “Buy American and Hire American” order to seek changes in government procurement that would boost purchases of American products in federal contracts, with one aim being to help U.S. steelmakers.

The moves show Trump once again using his power to issue executive orders to try to fulfill promises he made last year in his election campaign, in this case to reform U.S. immigration policies and encourage purchases of American products.

“Strong Buy America domestic procurement preferences for federally funded infrastructure projects are vital to the health of the domestic steel industry, and have helped create manufacturing jobs and build American infrastructure,” said Thomas J. Gibson, president and CEO of the American Iron and Steel Institute, the largest trade group for North American steel manufacturers. “The foundation of a strong Buy America program is the longstanding requirement that all iron and steel-making processes occur in the U.S. for a product to be Buy America compliant — from the actual steel production to the finishing processes. This ‘melted and poured’ standard has been successfully applied since 1983 and must continue to be the standard used in federal Buy America rules for steel procurement. We applaud President Trump for affirming his commitment to full and effective enforcement of our Buy America laws, and to addressing the issue of unfairly dumped and subsidized steel, in signing this Executive Order today.”